Black Economic Empowerment Blog

May 2013

May 27, 2013

DURBAN: A Zulupressure group has called forSouth African Indians to be excluded from transformation processes, citing "overt racism" towards black South Africansfrom the time that Mahatma Gandhi was in the country.

But both the provincial government and the Indian community have dismissed the suggestions.

Mazibuye African Forum, claiming to advocate socio-economic justice for indigenous Africans in South Africa, particularly in KwaZulu-Natal province, was reacting to a decision by the provincial government to erect a statue in Durban to commemorate the arrival of the first Indians in 1860 as indentured labourers for sugar cane farms.

"We have and are still calling for the Indians to be completely excluded from Black Economic Empowerment, Affirmative Action as well as Employment Equity unconditionally, with immediate effect and reiterate that their classification with Africans as a previously disadvantaged group is not only counter-productive but counter-revolutionary as well," Mazibuye chairman Zweli Sangweni said in a statement.

"Indians have been overtly racist towards Africans from the time they were brought in South Africa by the British Imperial Government," Sangweni said.

May 21, 2013

BDLive carried this story this morning (and no I haven't subscribed and won't do so until they change their viewing rates). The Black Business Council (BBC) has long been upset with the PPPFA. With such ZumaLuminaries like Zungrabber on their board they are able to namedrop very effectively and force a meeting with Treasury to voice their concerns. They plan to march to Treasury in Pretoria "to express our serious issue with the Preferential Procurement Policy Framework Act (PPPFA) and the negative role of the National Treasury towards BEE". They want the PPPFA repealed altogether so that set asides can be used to allocate spend to certain types of black business. Something that Malusi Gigaba has insisted that he will allow. But the best thing here is that they are threatening to go to the Constitutional Court for the final word. However I don't think that Zungrabber and his lot will be willing to shell out cash for this case. I suspect they are going to browbeat and namedrop until Pravin relents. Let's say that they do go to the Constitutional Court and I was the advocate representing Treasury (I'm sure I could fake a university degree and forge my acceptance to the bar to do this), this is the argument I would use.

The BDLive article refers to section 217, a section of the constitution that I have blogged about often. Section 217 is where we find the need for the PPPFA, specifically section 217 (3)

National legislation must prescribe a framework within which the (allocation of preference points) may be implemented.

But – section 217(1) says this

217. (1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.

It identifies five principles of procurement that every company should implement; namely fair, equitable, transparent, competitive and cost-effective. Treasury argues that these five principles provide enough protection for those who claim they are marginalised. They further argue that the PPPFA provides preference points that take those same principles into account. Set-asides would compromise the fairness, competitive and cost-effective principles.

The BBC on the other hand are going to depend entirely on a piece of section 9 (2) of the Constitution

Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken.

They will argue that certain people are still unfairly disadvantaged and that the PPPFA does not go far enough. People like me would counter that by suggesting that the promotion of a class of person in state procurement favours them unfairly over other citizens. After all section 9 (3) says

(3) The state may not unfairly discriminate directly or indirectly against anyone on one or more grounds, including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth.

But the BBC won't take that lying down. They'll say that section 36 (limitation of rights) allows the limitation of certain rights. This is where my constitutional knowledge becomes scratchy. I would imagine that the rights of certain people (read white or foreigners) could be limited "in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society".

Ultimately the final argument is going to revolve around section 9(5)

Discrimination on one or more of the grounds listed in subsection (3) is unfair unless it is established that the discrimination is fair.

We'll argue that the discrimination proposed by the BBC is unfair and they'll argue it's fair. It is therefore vital that this issue does go to the Constitutional Court. But as I mentioned earlier in this post, I somehow doubt that it will get to the highest court in the land, the BBC and Malusi will no doubt namedrop and bamboozle Treasury into agreeing to this because the ANC needs to deliver something to the very pissed off black middle class. There will be consequences however.

The state will pay an unnecessary premium for goods supplied by black suppliers. This concern has been voiced by Treasury many times over the last ten years.

The taxpayer is going to have to foot the bill for this which is going to result in Treasury allocating funds for things like healthcare, security, basic services etc. to state procurement.

Those black suppliers who are now doing very well thank you very much from the state will never be competitive in the private sector that will be loath to pay a premium from companies that have little more to offer than the colour of their skin.

It will further divide the economy into black suppliers who look after the state and white suppliers (i.e. not black) who look after the private sector (and probably supply the black companies to sell to the state).

And the ANC will then claim that the private sector is white and racist and the reason why black South Africans are so poor.

All of this is probably of little concern to the BBC or ANC. Both live for the present and have little concern for the future. And the future does not look too rosy at all.

May 19, 2013

A farmers' union has asked me to present a course on the AgriBEE Code. In conducting my research I could not fathom why any entity involved in agricultural would want to pay any attention to the AgriBEE scorecard. It's rather like paying your TV licence because it's the right thing to do but otherwise there is no other perceived benefit. The real issue with agricultural land is that of land restitution and the AgriBEE Code attempts to offer some sort of incentive to agricultural land owners to become part of this process. The only incentive offered being BEE points under the ownership scorecard. Government has committed to a number of initiatives to facilitate ownership under the code – all of which are stated land reform outcomes and land reform is still awaiting the finalisation of the Land Reform Green Paper. Most of the ownership aspect of the AgriBEE code does depend on the finalisation of the land reform legislative process.

Contribute to increasing access and acquisition of agricultural land by Black People, through its existing programmes;

Proactively acquire suitable agricultural land that comes onto the market for land redistribution

Use above mentioned land and agricultural land that reverts to the state through foreclosure of indebted farmers, for redistribution, including through long lease arrangements (e.g. 99 year lease)

Promote sustainable management and use of natural resources

Finalise the land restitution process (it must be noted that the draft said this was to be done by 2008 – the code leaves this deadline open)

Encourage the development of a land lease and land rental market

Promote the consolidation and tenure on traditional community land in terms of relevant acts that support communal land

Secure the ownership, access and tenure rights of Black Designated Groups through the registration of old order rights or new order rights into freehold ownership.

Returning to my earlier argument that, other than land redistribution there is little reason to implement a BEE scorecard within an agricultural environment. Implementation of BEE cannot be enforced without a procurement process driving it. It is because of the preferential procurement element that all BEE scorecards exist. The principle is simple – a large corporate asks its suppliers for a BEE scorecard because this has an impact in their own preferential procurement scorecard; the supplier asks its suppliers and so you get further down the chain. BEE has succeeded because of this process and this is without any assistance from the government. Agricultural produce, like all consumer goods should in theory fit in with this model. The retail sector is not the fastest adopter of BEE because there is less pressure on them to comply. The average customer is not concerned about the BEE status of their favourite retail store (although I think Jimmy Manyi might be), they purchase for a variety of reasons that are unrelated to BEE status. It is very likely that agricultural products are going to follow the same process. Pick 'n Pay is not going to quibble about the BEE status of a carrot supplier, they are going to buy because the stock is available and the price is right. Similarly, Tiger Brands is not going to prioritise baked bean suppliers on the basis of BEE status because it might possibly impact on the quality and price of the product which will result in me not buying a tin of Koo baked beans. The code does make a pathetic attempt at creating preferential procurement urgency by claiming that government will

Align their procurement practices with AgriBEE when procuring goods and services from the agricultural Sector

Provide Black People and QSEs preferred supplier status in the procurement of goods and services;

Identify, prioritise and target Black entrepreneurs and Enterprises which contribute to broad-based BEE when awarding tenders and contracts to entities in the private sector; and

Utilise all legislative and other measures available to it, including preferential procurement, to influence the attainment of broad-based BEE objectives

Of the four drivers only 1 and 4 carry any weight. In fact number 4 is a repeat of number 1. Numbers 2 and 3 lack the constitutional and legislative muscle to enforce. As it stands at the moment government is not permitted to prioritise classes of suppliers for their procurement. The success of the uptake of AgriBEE will therefore depend entirely on government as a consumer in this model. I suspect that this is not enough to sway farmers to implement any form of BEE in their organisations.

However – we are not out of the woods completely. A trend is starting to emerge within government legislative circles where BEE scorecards are going to be required when certain licences are allocated. This has been threatened in the allocation of liquor licences. There is nothing stopping the Department of Water Affairs from insisting on BEE compliance in the allocation of water licences. In the absence of such a driver it is likely that uptake of AgriBEE is going to be very slow.

May 15, 2013

The culture of the state’s major departments — and agriculture, forestry and fisheries — is certainly, like that of major corporations, determined by its minister or chairman. In this case it is Tina Joemat-Pettersson, who is in the running for acclamation as the worst minister in the Zuma cabinet. She has outrageously abused expense allowances, inexplicably involved herself in a violent unprotected strike by Cape farm labourers, egging them on to do worse, and generally failed to provide proper guidance to civil servants or develop plans to safeguard South Africa’s food security.

May 14, 2013

If there is one consistent feature of Zoomer's cabinet it is that he appoints people who should not allowed to maintain a scholar patrol let alone a cabinet position. Think Tina, Dina, Rob, Bloomers Motshekga, Siyabonehead Cwele, Colic Shabane and the list goes on. Malusi Gigaba, minister of public works, made an announcement today that 50% of all coal purchases will come from black owned miners. A noble idea but it is very clear that he has no lucid plan as to how to go about doing this. Oh he has a few ideas like

" we will be exploring set-asides and other mechanisms radically to accelerate the promotion of black industrialists and the entrance of youth- and women-owned businesses into the mainstream economy".

I am not going to bemoan the nobleness of this idea. What I am concerned about is this notion of set-asides. I have blogged about set-asides before (often), in each of these posts I have gone to great lengths to show that other than the fact that Treasury has outlawed them they are also a little south of what section 217 of the Constitution prescribes. There is little doubt that Malusi has got to get Treasury's permission to do this. And Treasury is not an easy nut to crack with this one because they will inevitably end up paying a premium for coal because they have to meet their set-aside targets. And we know that the ANC feels rocks when it comes to paying a premium for websites or anything when their cronies are the suppliers. But this Transnet has managed to persuade Treasury to modify their empowerment requirements, as this page explains.

A six-month battle between the Treasury and the Department of Public Enterprises over the empowerment and local content weighting in Transnet's R35bn acquisition of new locomotives has ended with the Treasury agreeing to let the tender go unchanged. The sticking point between the department and the Treasury over the tender was the weighting Transnet would be allowed to apply to evaluate the bids. Under the Preferential Procurement Policy Framework Act, state-owned companies are required to use a 90:10 ratio, with 90% of the evaluation based on price and 10% on economic development commitments. Transnet, however, had structured its bid using a formula of 60:20:20. In this formula, 60% of the competition between bidders would be on price. The other components of the evaluation criteria were for 20% of the assessment to be focused on industrial commitments, with the balance being judged on a range of broad-based black economic empowerment criteria.

Treasury's greatest concern "related in part to a fear that the state will overpay for capital goods. Another concern is that local industrial programmes, shielded by the state's purse, could spawn industries unable to compete globally on quality or price."

We all know that Zoomer is driving the country into the ground, if Mal Oosie gets his way with the set-asides we'll know that Treasury is no longer concerned about the country. It is a sign.

May 08, 2013

This is fair enough and I would be prepared to pay for this access. However Business Day seem to think (and Peter Bruce warned us early this week) that R11/day for online access is a realistic price. A year's subscription will cost R4233. They've got to be kidding - this is an extortionate price. And something that I won't be paying even though it will have an impact on the content on this blog.

I'm going to start a Facebook page - I would be interested in paying about a third of that price. It is my loss - but if you think about it I couldn't link any of their sites to this blog because you wouldn't be able to see that content without paying for it.